Complete Book PDF (4.12MB) - World Bank eLibrary

Corruption in the Mining Sector: Preliminary Overview 379
The three major areas of corruption risk in the Ethiopian mining sector
have been analyzed and mapped:
• License issuing. Licensing authority officials may extort or be offered
bribes by mining companies in return for issuing licenses, for issuing
licenses more quickly, or for specifying less-onerous license conditions.
• License operation. Mining companies may deliberately breach mining
conditions (for example, environmental, health, and safety regulations,
as well as the extent or area of mining permitted).
• Mining revenue. Mining companies may deliberately understate output
and profit and overstate costs to reduce royalties and profit taxes.
If the license operation and mining revenue breaches are discovered,
the mining company may also bribe inspectors to overlook the breaches.
In addition, there are corruption risks in relation to
• The interface between mining companies and local inhabitants (for
example, theft of compensation payments by local officials or illegal
mining by local inhabitants in a mining company’s license area)
• The contractors and suppliers to the mining operation
• Falsification of the quality of the product
• Theft of the product.
In general, some effective anticorruption measures govern the Ethiopian
mining sector. The laws and regulations as well as the documentation and
processes for issuing and operating licenses are clear and simple, therefore
minimizing the complexity in procedure and discretion of officials that
can facilitate corruption. There are some committed and well-qualified
licensing officials and inspectors. A new computer database is being
developed to improve access to license information, and the Ethiopian
government is implementing business process reengineering (BPR) to
speed up the license issuing process. These all play an important part in
reducing the risk of corruption.
However, further steps are recommended to enhance existing anticorruption
controls, particularly regarding the licensing and regulation processes.
A key problem lies in the shortage of well-trained licensing
authority staff. In license issuing, there is a shortage of officials to deal
with the increasing number of license applications and the complex
issues that arise in relation to license conditions. In license operation and
revenue calculation, there are too few inspectors and auditors to inspect